What is Option Arbitrage?
The underlying concept of option arbitrage has to do with a systemic and simultaneous buying and selling of stock when certain market conditions are in effect. Here are some facts about how an option arbitrage is conducted and what types of market conditions usually exist that warrant the implementation of option arbitrage. Option arbitrage often occurs when the main goal is to create a modest profit that involves little or no risk to the shareholder. To this end, there are several different forms that option arbitrage can take. One of the more common models is referred to as a strike option arbitrage. With this model, there is a simultaneous buying and selling of the same options, with all activity carrying the same type, either put or call. In order for the strategy to work, the strike difference has to be less than the premium difference. This type of option arbitrage is almost completely risk free and has the potential to yield a small profit. A calendar option arbitrage is very si
